First Northern bulks up capital for small-business lending

The parent company of First Northern Bank on Tuesday paid down its federal Capital Purchase Program borrowing and also got in investment from Treasury to make more small-business loans.

First Northern Community Bancorp got an investment from the Department of the Treasury in $22.8 million of the bank’s preferred stock so the bank can participate in the Small Business Lending Fund program.

The program encourages lending to small businesses by extending capital to banks at a competitive rate. The initial dividend rate is 5 percent, but if it meets goals, the cost of the money can be decreased to as low as 1 percent.

“We are pleased to have been selected among healthy financial institutions to participate in this important program. We have completed the SBLF capital infusion in support of our small-business lending operations and have repaid the CPP investment,” said Louise Walker, chief executive, in a statement. “Our participation in the SBLF program is a great opportunity for our company to continue to meet the credit needs of small businesses in the communities we serve.”

At the same time the bank got its small-business funds, First Northern redeemed $17.4 million of shares of its preferred stock issued to Treasury in March 2009 under the Capital Purchase Program, which was a voluntary program of the Troubled Asset Relief Program.

“Funding under CPP allowed added protection to shareholders and depositors at a time when there was much uncertainty in the financial markets,” Walker said.

Treasury still has a warrant to purchase 352,977 shares of the First Northern’s common stock at $7.39 per share.

“The Bank will attempt to repurchase these warrants from Treasury in the coming weeks,” she said.

Based in Dixon, First Northern was founded in 1910. It has branches along the Interstate 80 corridor from Fairfield to Auburn.